Currency Translator Retained Earnings Adjustment

Currency Translator assumes that exchange rates for retained earnings reflect the historical basis of the account, and translates retained earnings in historical periods. It calculates the retained earnings and compares it to the translated data. If they do not match, Currency Translator adjusts the translated data to balance the Funds Flow report.

Currency Translator calculates retained earnings as:

Retained Earnings =	Retained earnings (prior period)
	+ Income available for common dividends
	- Common dividends
	+ Funds flow adjustment: sources
	- Funds flow adjustment: uses

Retained Earnings Adjustment =	Retained earnings
	- Retained earnings (prior periods)
	- Income available for common dividends
	+ Common dividends
	- Funds flow adjustment (sources)
	+ Funds flow adjustment (uses)

Strategic Finance adds the retained earnings adjustment to the account structure so you can review how it calculates. The Translator adjusts the amount and creates an account called the Retained Earnings Adjustment Account (v2853.0.000)

Example:

In Deutschemarks

(adjustment applies to all historical periods, except the first historical period)

Item	2003	2004
Retained earnings	500	2000
Net income		2100
Dividends		600

Equity exchange rate	.7	.7
Year-end exchange rate	.667	.75
Weighted avg. rate		.72

In U.S. Dollars - After Translation

Item	2003	2004
Retained earnings	350	1400 direct translation at equity historical rate
Net income		1512 weighted average rate
Dividends		432 weighted average rate

The retained earnings calculated by the normal retained earnings formula is:

350
1512
(432)
1430

... not 1400. This difference of 30 is the retained earnings adjustment.